Stop stoking uncertainty, SBY tells EU

European leaders at the Group of 20 summit in Mexico have received an ultimatum to stop stoking market uncertainty and step up their fight against the financial crisis posing the biggest threat to the world economy.

While China pressed world leaders to provide a signal of “confidence" to markets, Indonesian President
Susilo Bambang Yudhoyono
warned that the turmoil was spilling over to south-east Asia’s largest economy and threatened to drive up oil prices.

Mr Yudhoyono said he was “deeply concerned about the scale and magnitude of the crisis in the euro zone", in a speech in the Mexican resort of Los Cabos. “I hope that one way or another our European colleagues will reach an agreement on rigorous methods to manage the crisis. The absence of such methods will have unsettling consequences to all of us."

G20 leaders are in Los Cabos for a two-day summit dominated by the financial crisis in Europe and its impact on the global economy. While Greeks voted to give the two largest pro-bailout parties enough seats to form a government, reducing the risk of an exit from the euro, Spain is moving into focus as borrowing costs soar to records.

World Bank president
Robert Zoellick
, speaking in Los Cabos, said European leaders had increased market uncertainty through their “incremental" steps. Even the announcement of a €100 billion ($125 billion) banking rescue for Spain was bungled, he said.

China’s President Hu Jintao said in a written interview the G20 should adopt a “constructive and co-operative approach" to “encourage and support European efforts and jointly provide confidence to the markets".

World leaders will boost the $US430 billion firewall the International Monetary Fund announced in April, said the G20 host, Mexican President Felipe Calderon.

“I estimate there will be a larger capitalisation than the pre-accord reached in Washington, which will be finalised here," he said. “But I don’t want to speculate by how much."

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While the G-20 agreed earlier this year to boost IMF resources that could be channeled to Europe, Merkel, the key player in more than two years of crisis fighting, last week called on the G-20 to do more.

IMF chief Christine Lagarde, speaking on the same panel as Zoellick, said that “there’s clearly work in the making that needs to be done" by Spain on formulating its request for aid, citing the need to give more exact numbers.

Mr Zoellick said “execution" of the aid announcement “was extremely poor" since it was unclear which rescue fund aid would come from or whether other government debt would be subordinated if there was a default. Europe’s leaders “took a very big bullet, and wasted it", he said, referring to the Spanish bank announcement.

European governments must work together to strengthen their institutions to prevent damage from spreading to countries like Spain and Italy, Calderon also said, adding the G-20 communique issued at the summit’s end will endorse steps taken by Europe to achieve closer monetary and fiscal union.

Expressing concern about the European economy after meeting today with European Commission head Jose Barroso and EU President Herman van Rompuy, Calderon said his country is ready to help “Europe overcome the problems currently being faced and to prevent similar events from recurring," according to an e- mailed statement from the Mexican presidency.